Analysis: IMF cash has strings attached

Key parts of Yugoslav industry were hit by Nato bombs

By business reporter Lesley Curwen

The admittance of the Federal Republic of Yugoslavia to the ranks of the International Monetary Fund (IMF) is being seen as a key step in its attempts to get back into the mainstream of European commercial life.

The old Socialist Republic of Yugoslavia had been a member of the IMF until its break-up in the early 1990s.

Yugoslavia's economic decline has made many dependent on handouts

Now the rump of that republic, composed of Serbia and Montenegro, once again has access to international loans.

This is a big step forward, because foreign corporations may stay wary of investing in the country until stability and reform are well established.

They'll want to be sure that they can repatriate their profits safely, and that they can rely on the law governing business contracts.

Strict conditions

Reviving an economy devastated by the Kosovo conflict will be a huge task.

Yugoslavia needs funds in order to rebuild

Half the labour force is unemployed, annual inflation is running at 110%, and economic output is only 40% of its 1989 level.

Serbia and Montenegro have already been given $151m in what the IMF calls "post-conflict assistance", to stabilise the economy.

But any future loans may involve strict conditions.

Since the ousting of former President Slobodan Milosevic, the authorities have taken action to devalue the currency, the dinar, adopting the former black market rate against the German mark.

The IMF has welcomed this move, as well as steps taken to dampen down rising inflation.

But it's expected to insist on higher taxes, lower spending and the scrapping of government subsidies on food and fuel, which might prove painful for the population as a whole.

Some would argue the mark of international respect gained by joining the IMF comes at a price.